The Law of Diminishing Returns Begins First to Affect a Firm's

question 49

Multiple Choice

The law of diminishing returns begins first to affect a firm's short-run cost structure when

• A)average variable cost begins to increase.
• B)marginal cost begins to increase.
• C)average cost begins to increase.
• D)average fixed cost begins to decrease.

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Definitions:

Circular Flow Model

An economic model illustrating the continuous movement of money, goods and services, and factors of production between producers and consumers in an economy.

Interdependence

Interdependence is a condition where entities are mutually reliant on each other, implying that actions of one can significantly impact the others.

Businesses

Economic entities (firms) that purchase resources and provide goods and services to the economy.

Product Markets

Markets where goods and services are bought and sold, connecting buyers and sellers.